If California Is Doing So Great, Why Are So Many Leaving?

Superficially at least, California’s problems are well known. Are they well understood? Apparently not.

About a year ago Time ran an article, "Why California is Still America's future," touting California's future, a future that includes gold-rush-like prosperity in an environmentally pure little piece of heaven, brought to us by "public-sector foresight."

More recently, Brett Arends' piece at Market Watch, "The Truth About California," is more of the same. California's governor elect, Jerry Brown, liked this piece so much that he tweeted a link to it.

The optimist’s argument about California’s future ultimately hinges on the creativity of the state’s vaunted tech sector, in large part driven by regulation promulgated by an enlightened political class and funded by a powerful venture capital sector.

No fundamentalist evangelical speaks with more conviction or faith than a California cheerleader expounding on the economic benefits of environmental purity brought about by command and control regulation.

The more honest cheerleaders acknowledge that California has challenges, including persistent budget problems. Arends denies even the existence of a budget problem, demanding "Er, no, actually. It’s your assertion. You do the math." Let me help you, Brett. The non-partisan California Legislative Analyst's Office has done the math. You can find it here. They expect budget shortfalls in excess of $20 billion a year throughout their forecast horizon. This is on annual revenues of less than $100 billion.

Last week the numbers got even worse, as the Governor-elect, Jerry Brown, acknowledged. The deficit may now be as much as $28 billion this year, and over $20 billion for the foreseeable future. This is more than a nuisance. There’s a reason, after all, why California has among the worst credit ratings of any state.

Most people outside of California haven't drank from this vat of the economic equivalent of LSD-laced Kool-Aid. People know that a state is in trouble when it has persistent intractable budget deficits, chronic domestic net out-migration, and 30 percent higher unemployment than the national average. Indeed, California’s joblessness, chronic budget deficits, governors, and credit rating have made the state the butt of jokes worldwide.

How bad are things in California? California's domestic migration has been negative every year since at least 1990. In fact, since 1990, according to the U.S. Census, 3,642,490 people, net, have left California. If they were in one city, it would be the third largest city in America, with a population 800,000 more than Chicago and within 200,000 of Los Angeles’ population.

We’re seeing a reversal of the depression-era migration from the Dust Bowl to California. While California has seen 3.6 million people leave, Texas has received over 1.4 million domestic migrants. Even Oklahoma and Arkansas have had net-positive domestic migration trends from California.

Those ultimate canaries in the coal mine, illegal immigrants, recognize California's problems. Twenty years ago, about half of all United States illegal immigrants went to California. Today, that’s down to about one in four.

The result of these migration trends is that California's share of the United States population has been declining.

What do these migrants see that so many of California's political class do not see? They see a lack of opportunity. California's share of United States jobs and output has declined since 1990, and its unemployment rate has remained persistently above the United States Average, only approaching the average during the housing boom.

California's unemployment is particularly troubling. As of October 2010, only two states, Nevada at 14.2 percent and Michigan at 12.8 percent, had higher unemployment rates than California's 12.4 percent. California's unemployment problem is particularly severe in its more rural counties. Twenty-five of California's 58 counties have unemployment rates higher than Nevada's:

These unemployment rates approach depression levels. Some will excuse many of them because they are in agricultural areas, but many assert that low Midwest unemployment rates are due to a booming agricultural sector. Which one is it?

California's unemployment problems are not limited to rural and agricultural areas. Most of Riverside County's population is very urban, yet the County's unemployment rate is 14.87 percent. On December 7th, the Wall Street Journal listed the unemployment rates for 49 of America's largest urban regions. California had six of the 19 metro areas with double-digit unemployment. These include such major cities San Diego, San Jose, and Los Angeles.

Just as rural areas are not California's only depressed areas, agriculture is not California's only ailing sector. From 2000 to 2009, the only California sectors to gain jobs were government, education and health services, and leisure and hospitality.

California's cheerleaders claim that the state's future is assured by a vibrant tech sector, but the data do not support that assertion. North Dakota's Praxis Strategy Group has performed analysis by job skills. They compare Scientific, Technical, Engineering, and Math (STEM) jobs across states. Their analysis shows that California is the Nation's ninth worst state in creating STEM jobs in post dot-com-bust years. It has produced far fewer new tech jobs than Texas, and far less on average, than the country over the past decade:

In this respect, California's precipitous decline is really quite shocking. In just a couple of decades, California has gone from being America's economic star, a destination for ambitious people from around the world and abundant with opportunity, to home of some of America's most distressed communities. It has been a man-made, slow motion tragedy perpetuated by a political class that is largely deluded.

The cheerleader’s faith in command and control regulation and environmental purity is so strong they cannot see anything that contradicts that faith.

But that faith is misplaced. Joel Kotkin, Zina Klapper, and I performed an extensive review of the economic impacts of one of California's most important greenhouse gas regulation, AB 32, and found that command and control regulation in general and AB 32 in particular is inefficient, cost jobs, and depress economic activity. California's Legislative Analyst's Office agrees, as evidenced by this report.

More depressing still are the growing ranks of what could be called “the resigned”. They simply have given up. These include a business leadership that is more interested in survival and accommodation than pushing an agenda for growth. Easier to get along here, and expand jobs and opportunities elsewhere, whether in other states or overseas.

Yet ultimately California’s future is what Californians make of it. No place on Earth has more natural amenities or a more benevolent climate. No place has a location more amenable to prosperity, located between thriving Pacific Rim economies and the entire North American market. No place has more economic potential.

But unless policy is changed, California's future is dismal, with the specter of stubbornly high unemployment, limited opportunity, and the continued exodus of the middle class. California's political class needs first to confront reality before we can hope to avoid a dismal future.

Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org.

Glad to hear everyone is enjoying themselves reading how California is headed to the bottom and that because the liberal ideology and welfare state California has become. California has been dominated by liberal leftist and unions in Sacramento for decades because they promise that they fight for the poor but really they forge the chains to enslave the poor. Just read the article above. 23% live in poverty......and they want to blame Republicans! blame yourselves, because California gets the government they deserve and elected.
The Democrats want to blame big business but they don't tell you that there are more Democratic leftist millionaires and Billionaires in California than any other state. How do you answer that? The most richest people on earth are Democratic leftist progressive liberals.

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In 2011 a Tax Lein was placed against me by California without any notification. I moved to Denmark in 2007 and notified California of my change of address. However it seems their system cannot accept or recognize overseas addresses. So I used the address of a friend of mine who still lives in California as a forwarding address only.

When I contacted California about the tax lien it took them 3 months to finally communicate to me a provide their "justification" for the Tax lien. It seems tax greedy California has taken a new fund raising drive to send tax bills and liens to anyone who may have a mailing address in California and claim that they owe "back taxes". California actually told me that since I had a mailing address on record in California I needed to file and pay taxes. Again the only reason I had the address was because California could not recognize Denmark as a mail forwarding address.

Based on the fact I have residency in Denmark and I live and work there for a Danish company, I am exempt from paying taxes to USA or California if my income is less than 80K USD equivalent, which it is. It seems that because California cannot insert a mail forwarding address to Denmark and I instead I used a friends address for mail, money grubbing California tells me I must file a California state tax return nonetheless.

Oddly enough the notification of the Tax Lien was never sent to my California address on file either. The only way I found about this was an alert from my credit reporting agency when the lien was placed in my credit file.

I was considering moving back to California in 2012...but this has put an end to that thought. California's house is completely out of order. The welfare state was resulted in bloating public sector debt burden which cannot be supported by the dwindling tax base from the housing crash to the loss of business from increased taxes. California's answer is to increase tax and create false tax budens. Everyone knows you cannot tax your way out of debt and crisis and unless someone (Jerry Brown) turns this around, California has not seen bottom yet.

When I went back to visit California in 2010, the foreclosures were increasing and the divide between the rich and poor was never more drastic. However the Emperors New Clothes were fantastic.

There are soo many reasons why California's people are leaving. Yes, illegal immigrants are definitely messing up our economy and the housing prices are ridiculously high, even to live in the ghetto! A lot of Californians have no idea how to live within their means, too. They go out and rack up enormous credit card debt, lose their jobs, default on their payments, screw up their credit, which subsequently makes it hard for them to find jobs later, as employers these days want to check credit reports before hiring people. So then they have to start implementing credit rebuilding strategies which usually take money to make work... truthfully, it's a sick, twisted cyclical process that damns the gullible and rewards those at the top! Everything in this states costs an absurd amount more than the national average. I mean, look at gas right now... 4.30 a gallon? If you're driving 20 miles to work a minimum wage job, like soooo many do, you're spending almost an entire day working just to ensure you can get to work to make money! California is a poorly planned state. We need to start working on public transportation and sustainability and in the meantime, start deporting people that are living here illegally.

Its hard for anyone to fight for what is right but in California it even harder especially when its naturally right, because in California the self righteous people there think its ok to ignore the rule of law for sentimental reason like “reuniting families.” They are so desperate to show the world how superior and pro-family (Which is non-sense and hypocrisy). If the cohesion of the family in the case of illegal alien amnesty was so important like the leftist liberal claims then these parents who came illegally would have never left their children behind..
Spineless and lazy thinking Citizens of America are the real culprit. These citizens think its ok to ignore the borders of our nation for the sake of a better life for an illegal fail to understand that a better life rests upon the pillar of law and order. They also lack a true and real sense of ownership for America. That border is not some distant line far away from our homes in the desert. That border should be secured and defended as I am doing right now as his property lines and even his front door.
No one will let a stranger inside their home without knocking first and then with permission. Its the same thing here. Its a failure of ownership. There are citizens who think its ok for someone to enter through the back door of our nation, through the windows and don’t have to knock because to them they do not see America as their house. All America asks is to be respectful and please come to the front door and knock. If asked to take your shoes off (Speak English) then do it because this is our house but there are citizens who believe that a stranger can enter our house without knocking through the window and start making up rules for us in our house. America will continue to have this illegal immigration problem until they take ownership of their country, their border and their moral spine and see America the country they claim to love so much like they see the front door of their own homes. Then and only then will they will defend her.

When you get right down to it, the question is this: Are Californians interested in more growth -- if the economic growth means population growth. For most, I think the answer's no. Most residents think 40 million people is plenty. That leads to slow-growth policies, which push up housing prices (thanks, tx) and slow industrial development that Texas welcomes.

I'd suggest "command and control" is just a catchphrase -- it's all about laws that allow anything and everything to be slowed down, often not at all by government but by ordinary irate citizens. But try reforming CEQA and see how far that plan gets you.

There have been literally dozens of stories similar to this one- casting this sort of dystopian view of California and how that so many people are moving away- a lot of them to another big state- Texas. Much can be made over the faults within- such as high taxes, the sour environment for business, and so on. But none of these- even combined- are the reason people are leaving California.

My answer is the same as it has been to all the other articles like this: Affordable housing. People will move if they can't afford decent houses in a metro area. California's history as a world-class economic powerhouse has been more recent: right after WW2 the state was flooded with fresh arrivals and suburban tract homes were thrown up at a torrid pace. Right up through the 70's the average cost of a home in California was in lockstep with the rest of the country. But then something happened. Prop 13 was passed and make what you want of it- but the cost of housing has skyrocketed ever since. I won't argue any further beyond that but the aftermath- whether Prop 13 is to blame or not- is that the cost of houses in California is simply unaffordable for the vast bulk of the population.

As I mentioned in previous posts, my wife and I actually do quite well. We make well into a 6-figure income. We could technically afford a house here. But the house we would get would be a small, un-updated 1940's house and it would probably set us back close to $500,000. It would eat up the bulk of our monthly incomes. Sure- we could afford it. A lot of people we know who've bought do exactly that- they barely scrape by just to have "A" house. But as seen in recent years one thing can definitely be counted on: No job is secure. If either one of us lost our job, having a monstrous house payment would become an albatross. Besides- 5 years into the housing collapse in this state the prices are for the most part flat or in some cases still falling. What's the point? Thus we and of course the majority who make less than we do and thus really can't afford a home at all are packing their bags.

In a market based economy, the prices of homes is determined by what people can and will pay. There are still affordable homes in California, you just wont be living near the beach. With the advent of the internet, many people can now work from their homes which makes buying an affordable home easier as well.

If a government offers affordable based housing then they manipulate the market and the results are often exactly the opposite of what is intended.

From first hand observation living in Denmark, I can see the government involvement in housing has had the exact opposite desired effect: astronomical prices of homes, even more expensive per sq ft than California. Why? Well when the government places everyone in subsidized housing in say Copenhagen, then there is no market for builders to build new homes. Demand exceeds supply if there are no new homes, then the homes there are become not only expensive but in many cases just sh it holes. This creates vertical slums in the inner cities. People living in shoe box sized apartments on top of each other in ghetto conditions.